False SEC Post Sends Cryptocurrency Prices Swinging, Bitcoin ETF Approval Uncertain

Washington – Prices of cryptocurrencies experienced significant volatility on Tuesday following a false post on the US Securities and Exchange Commission’s (SEC) official Twitter account. The post claimed that the regulator had approved the first-ever US spot bitcoin exchange-traded funds (ETFs). The fake announcement spread quickly on social media and news outlets before being debunked by SEC Chair Gary Gensler, who confirmed that the tweet was unauthorized and that the SEC had not approved the listing and trading of bitcoin ETFs. The SEC later regained control of its account and deleted the false post.

The SEC attributed the unauthorized access to an unknown party and stated that it would collaborate with law enforcement and other government partners to investigate the incident. X, the social media platform, revealed that the compromise was not due to a breach of its own systems but rather the result of an individual gaining control of a phone number associated with the @SECGov account through a third party. It was also discovered that the account did not have two-factor authentication enabled at the time of the compromise.

Bitcoin initially rallied following the false announcement but quickly reversed its gains, sliding as much as 3.4 percent. The SEC’s decision on spot bitcoin ETFs, expected later this week, has attracted significant attention from cryptocurrency enthusiasts. Eleven asset managers currently have applications pending before the SEC to launch spot bitcoin ETFs. The SEC faces a deadline of Wednesday to approve some of these applications.

While the SEC has previously resisted approving such products, a federal appeals court ruling last year criticized the SEC’s rejection of Grayscale’s application to convert its bitcoin trust into an ETF. The court described the rejection as “arbitrary and capricious.” This year, bitcoin has gained about 7 percent in value on hopes that the SEC would grant approval.

Several applicants have received feedback from SEC staff hinting that approval could be possible this week. Notable applicants include BlackRock, Invesco, Franklin Templeton, Ark Investment Management, and Bitwise. Some of these applicants have recently disclosed reduced or waived fees for their prospective products.

Bitcoin ETFs have long faced scrutiny from the SEC, which argues that these products cannot provide the same level of investor protection as traditional investment vehicles. Gensler recently highlighted potential drawbacks to investing in cryptocurrency products, emphasizing that issuers may not comply with applicable laws and that crypto investments are exceptionally risky and volatile.

In conclusion, the SEC’s Twitter account was compromised, leading to a false announcement about the approval of bitcoin ETFs. The SEC quickly debunked the news and regained control of its account. The incident has intensified anticipation for the SEC’s decision on spot bitcoin ETFs, with several asset managers awaiting approval. While the SEC has been hesitant to approve such products in the past, a previous court ruling may impact the agency’s stance.